Venture capital in the UK
The VC market in the UK is something to be proud of. It is the third largest in the world, raising behind only the US and China. It is also the largest market in Europe by a significant margin, attracting more investment during the past three years than France, Germany and Sweden combined.
The BVCA report, Venture Capital in the UK, sets out the scale of investment in VC sector in nations and regions across the UK. It also addresses what is needed from pension investment reform and the scale-up funding ecosystem in order to unlock the capital that can help drive businesses and growth in the UK.
Supporting scale-up businesses
The UK has an incredible pipeline of entrepreneurs and founders building amazing companies and a broad base of VCs and other investors backing them, wherever they are in the UK. In 2023, almost half (49%) of businesses backed by venture capital were located outside London, showcasing the geographic spread of innovation across the UK.
However, we need to get better at supporting young British companies to scale up. When UK companies look to continue to grow from series B stage funding and beyond, the significant investment gap in the UK means investment is often found elsewhere.
In an increasingly competitive global market for new technologies, the UK must have the right frameworks in place to continue to attract the best global talent, enable new innovation, and build the best infrastructure.
Driving change
The reforms announced in the Chancellor’s Mansion House speech are welcome. As the report sets out, achieving a thriving VC ecosystem means putting in place a stable and competitive tax system and regulatory framework, bridging the scale-up gap, increasing UK pension investment in private capital, and ensuring government-supported investment vehicles support the early-stage ecosystem.
The recently announced pensions reforms are a landmark step towards solving these challenges, driving impactful, long-term growth and delivering significant benefits for UK pension savers. Larger, consolidated pension schemes have greater opportunity to invest in higher growth assets, like private capital funds that drive investment into exciting UK businesses whilst delivering strong-returns for pension savers.
Achieving this will require commitment from government, regulators and industry to be ambitious and work towards ensuring access to the levels of funding that equivalent companies in the US have.
